Net-zero Pressure Having an Effect on Canada’s Major Banks

Investors are evaluating emissions targets more closely, and several of Canada’s largest banks are taking action to back up their net-zero commitments.

CIBC, Royal Bank of Canada, Toronto-Dominion, Bank of Nova Scotia and Bank of Montreal all plan to raise their fossil fuel finance by $61 billion by 2021, according to a Rainforest Action Network analysis released in March. Those banks loaned $911 billion to the fossil-fuel industry from 2016 to 2021. A Greenpeace report conducted a similar investigation in August 2021.

The banking industry, on the other hand, is establishing emissions reduction goals. Last n October, the following banks have joined the UN-convened Net-Zero Banking Alliance (NZBA): Bank of Montreal, Bank of Nova Scotia, CIBC, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank.

Before, most bank discussions ongoing net-zero have focused on emissions under Scope 1 and Scope 2, which include greenhouse gas emissions related to the bank’s own operations. However, the real problem was always going to be Scope 3 emissions, which are emissions from upstream and downstream activities, as well as financing.

Members of the NZBA have 18 months to set interim decarbonization objectives for 2030 with a focus on clients in carbon-intensive industries, like oil and gas. Banks must report their emissions data every year, and they must set new targets every five years until they reach the goal of zero emissions by 2050.

RBC, one of the banks that has provided information, assessed its 2021 balance-sheet-wide carbon footprint at 45 million tonnes but delayed setting interim goals until the spring of 2023.

Similarly, CIBC set a target of 35% reduction in Scope 1 and 2 emissions for its oil and gas borrowers from a baseline of 2020 by 2030 and a 27% decrease in their Scope 3 emissions.

BMO also targeted the oil and gas industry, aiming to reduce Scope 1 and 2 emissions by 33% from the 2029 baseline, and Scope 3 emissions by 24% by 2030.  A 45% reduction in the carbon intensity of the bank’s lending portfolio for electricity generation is another target.

All reporting banks have expressed concern about the low quality of their data, which they attribute in part to customers not being forced to record their emissions. As a result of the interplay between clients across industries, the margin of error increases and the possibility of double-counting is also there.

Conor Chell, an environmental and regulatory compliance lawyer with MLT Atkins in Calgary, believes that mandatory reporting and enhanced data might be a double-edged sword for banks that fail to keep up their net-zero goals.

“Once that happens, we’re gong to see activists, shareholders and potentially regulators looking at companies that are not performing as well as their industry peers. From there, we could see litigation against some of the big players in each of those sectors,” Chell said.

Original source material for this article taken from here